One adverse effect of unexpectedly high rates of inflation is that such inflation
A) redistributes income away from those with fixed money incomes.
B) redistributes income to lenders.
C) increases the value of savings.
D) encourages productive rather than speculative uses of saving.
E) causes real incomes to rise more rapidly than money incomes.

Question

Quizplus · Accepted Answer

Unexpectedly high rates of inflation decrease the purchasing power of money, which means fixed money incomes lose value. As a result, people with these incomes will be able to purchase fewer goods and services, leading to a redistribution of income away from them.

One Adverse Effect of Unexpectedly High Rates of Inflation Is